End Run In Cleveland, Straight Arm In Dallas

The Browns are bailing, and Cleveland is steamed. Fans chanted epithets at a home game on Nov. 5 after word of the team's move to Baltimore leaked out, and callers flooded local talk shows to complain that the city hadn't been given a chance to save its franchise. "They're not my team anymore," says taxi dispatcher Joe Strejnowski. "I don't know if I should turn my sweatshirt inside out or burn it."

Deal with it, Cleveland. The reality is, the economics of pro football are changing fast, forcing an end to the arranged stability that has made the sport a remarkably peaceful and profitable enterprise for decades. Now, the National Football League faces the prospect of creating two classes of teams, much as baseball has: those with big money that can afford to sign the best players and make even bigger profits, and others that barely scrape by.

Art Modell cares very much about making money. That's why on Nov. 6, the Browns owner announced that his team would pull up stakes after 49 years in Cleveland. The Maryland pastures definitely are greener: Modell will get up to $75 million up front for relocating next season. And in 1998, his team will move to a new, publicly financed, $200 million stadium whose 108 luxury boxes and 7,500 club seats, plus concessions and parking, should provide the team with $20 million a year, three times what he says it gets now.

"ENORMOUS DEBT." Modell says that as player salaries have soared, he has dropped $21 million in the last two seasons and millions more since 1988--despite consistently strong fan support. "I had to do what I had to do," he says. "We built up enormous debt."

The Browns aren't the only team looking for the windfall that a change of scene can bring. This year, the Los Angeles Raiders skipped to Oakland, and the L.A. Rams to St. Louis. And as football's owners gathered for a meeting in Dallas on Nov. 7, there was talk that the Houston Oilers might soon pack their bags for Nashville and the Tampa Bay Buccaneers for Orlando.

The owners say they need revenue to offset the rising costs created by free agency and a salary cap. Proceeds from the league's $4.4 billion in television contracts, which are shared equally by all 30 teams, are fixed through 1997; similarly, ticket sales, about $1.8 million per game last year, can't produce much growth.

That means stadium revenue--luxury boxes and the like--has become the "key to marshaling financial resources needed to acquire players and build winning teams," says Paul J. Much, senior managing director at Houlihan, Lokey, Howard & Zukin, an investment bank that specializes in NFL team valuations. A decade ago, stadium sales accounted for less than 5% of total revenue among teams that collect those proceeds, says Much. Today, such receipts make up an average of 25% of those teams' totals.

Here's the problem. To attract the best free agents and to keep star players from leaving, teams increasingly are turning to guaranteed signing bonuses that allow big contracts to slip under salary caps. But such payments require big cash up front. NFL teams are expected to dole out $400 million in signing bonuses this year, four times what they paid in 1993. "Free agency came along, and the whole landscape changed. You had to have cash, available cash, to sign players," Modell gripes.

BIG DEALS. Jerry Jones, the flamboyant oilman who paid $140 million for the Dallas Cowboys in 1989, has shown the league how to play this new game. He has signed multimillion-dollar marketing pacts for his Texas Stadium with the likes of Nike, Pepsi, and American Express. Such deals allowed him to pay bonuses exceeding $40 million this year.

Jones's renegade antics have threatened the NFL's clubby security. None of his spmnsors have deals with the league's NFL Properties Inc. licensing arm, which is why the NFL has sued Jones for $300 million. On Nov. 6, Jones countersued for $750 million, claiming that the NFL is an illegal cartel "that has stymied competition between the clubs."

Indeed it has--and that was essentially the intent. Now, though, owners who can control stadium revenue have an undeniable advantage. "The old guard is saying, `We're not necessarily for this, but if they're going to do it, then why not me, too?"' says Andrew Zimbalist, an economics professor at Smith College. The result will be a jolt for fans, as Cleveland is discovering.

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